Reversing tax on freight charges

Freight may or may not be taxable based on the state. Use these instructions when a customer requests a credit for tax amounts that were charged on freight in a state that does not tax freight.

  1. Create two labor products in Product Setup and Product Warehouse Product Setup. Name one Tax Adj-TAXED and the other Tax Adj-NONTAXED. In Product Warehouse Product Setup, set the Tax Adj-NONTAXED product to be non-taxable and select a reason of Resale.
  2. Review all sales orders where freight was taxed incorrectly. Add the amount of freight for those orders for that customer and note the total.
  3. Select Sales > Entry > Order .
  4. On the Initiate window, select Correction in the Order Type field.
  5. Complete the remaining fields and click Next.
  6. In the Correction window, specify the Return Adjust Reason for the tax correction.
  7. In the Invoice # field, specify the invoice number to which this return applies.

    Linking the correction to the original invoice enables the Tax Interface to access the tax rates in effect on the invoice date. If you do not specify an invoice number at the order or line level, the current date is passed to the Tax Interface, and the current tax rate is used

  8. Leave the User Step Data option blank, unless you are entering a Correction order to reverse taxes charged to an exempt customer.
  9. Optionally, select or clear the Auto-Apply Credit to Original Invoice option. Use this option to specify how to apply credit transactions. The default value for this option is set in SA Administrator Options-Documents-Sales Orders. You can change the selection if your operator security allows it. The selection in this field, in combination with the original invoice value, determines whether credit is applied.
  10. Click OK.
  11. Click Continue.
  12. On the Select Products view, click Customer Order Settings.
  13. In the Reference field, specify the original invoice sales order number(s). Attach a note for additional space.
  14. In Select Products, add the first line item with these values:
    Product
    Specify the Tax Adj-TAXED labor product.
    Quantity
    Specify -1.
    Price
    Specify the total amount of the freight that was taxed incorrectly.
  15. Select the Tax Adjustment field.

    When selected, this option indicates that the labor product is being used to correct the taxes on a previous invoice. This option is available only if the order is a Correction (CR) type and the product is a labor item. When you create a Correction (CR) order type for a Labor product, the field is enterable. The Ship From, Ship To, Point of Order Origin (POO), and Point of Order Acceptance (POA) addresses from the original order are loaded onto the CR order. This enables the Tax Interface to calculate taxes at the same rate as the original invoiced order.

  16. Click Add.
  17. In the Add Line Item section, specify a second line with these values:
    Product
    Specify the Tax Adj-NONTAXED labor product.
    Quantity
    Specify 1.
    Price
    Specify the same price entered on the previous line.
  18. Click Add.
  19. Select the Taxes & Totals view.
  20. Confirm the order amount is a negative amount equal to the grand total of the orders or tax on freight being corrected.
  21. Click Save to complete the order.
  22. Run Sales Entry Invoice Processing Report to process the CR orders. This posts the debit and credit to the customer’s account and generates an invoice that is submitted to the customer.

    To invoice-process the order before your normal overnight batch process, contact your system administrator to request a one-time processing of these CR orders. The system administrator can also suspend printing of the invoice if you do not want the customer to receive an invoice.

  23. After the CR orders have been invoice processed, select Customer > Entry > Cash Receipts .
  24. Click OK to open a journal for the current date and posting period.
  25. Select Apply Credits.
  26. Click Next.
  27. Select Customer and specify the customer number.
  28. Click Next.
  29. In the grid, select the Miscellaneous Credit (MC) created by the first CR order.
  30. Apply this credit to the original invoice that was charged incorrect amount of taxes or should be exempt from the tax.
  31. Select the debit created by the second CR order and apply it in the same manner.
  32. When you are finished and the proof is zero, click Save.
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